Banks can lend against gold jewellery up to 75% of LTV: RBI

The Reserve Bank today came out with standardised norms for valuation of gold jewellery as collateral for loan from banks. "In order to standardise the valuation and make it more transparent to the borrower, it has been decided that gold jewellery accepted as security/collateral will have to be valued at the average of the closing price of 22 carat gold for the preceding 30 days as quoted by the India Bullion and Jewellers Association Ltd," RBI said in a statement. "If the gold is of purity less than 22 carats, the bank should translate the collateral into 22 carat and value the exact grams of the collateral.

In other words, jewellery of lower purity of gold should be valued proportionately," it said. Banks should continue to observe necessary and usual safeguards and also have a suitable policy for lending against gold jewellery with the approval of their board of directors, RBI said. Earlier this month, RBI had raised loan to value ratio to 75 percent from 60 per cent earlier. This was in view of moderation in the growth of gold loan portfolios of Non-Banking Financial Companies (NBFCs) in the recent past.